How sports betting could change gambling in Massachusetts

Tuesday

In an age of online shopping, bill paying and, potentially soon, sports gambling, playing the state Lottery still relies on cash, papers and conducting business in-person.

Now, some state officials, including Treasurer Deborah Goldberg, are again pushing to bring the state Lottery into the digital age, and supporters say it's more important now than ever. But not everyone agrees.

Goldberg, who oversees the state Lottery, recently warned state officials the lucrative operation would be stagnant and fail to compete with other gambling platforms unless allowed to expand online. The state Lottery is almost entirely a cash-based business, and its games, including scratch-off tickets, Powerball and Keno, are played with paper.

“We do not want to go the way of Sears or Toys R Us,” Goldberg said during her second inaugural speech in January.

The argument isn’t new. Calls to move the state lottery online date back at least eight years. But the idea to date hasn’t garnered much support, and lottery agent retailers -- who sell the games and earn 5 percent commissions on sales -- largely oppose the idea.

“Overall, we’d have a loss of commission, loss of related sales and with all of that business would decline,” said Jamie Salamone, owner of two convenience stores in Maynard and Stow.

Salmone estimates lottery games represent between 35 percent and 40 percent of his total sales, and moving games online could translate into fewer customers in his stores. He says it would be even worse for smaller retailers. People in Massachusetts spent $3.6 billion on instant games alone last fiscal year.

“Some of the smaller business that don’t have the sales we do would be really impacted by it,” he said.

Nonetheless, the push to move games online has gained a renewed sense of urgency given the emergence of sports gambling, proposed earlier this year by Republican Gov. Charlie Baker, and state Lottery Executive Director Michael R. Sweeney says the games must modernize to keep up with customer behavior.

“We need to be where the consumers are,” Sweeney said. “I think everyone would agree that with the advances of technology, especially over the last five years, consumers are increasingly shifting some of their purchasing habits to online platforms, in particular on mobile.”

If approved by lawmakers, sports betting could eventually move online and to mobile phones. The latter is an already-popular method of play proven by fantasy-sports companies, including Boston-based DraftKings.

But gambling and lottery experts say any claims that sports betting will chip away at the business of the state Lottery are likely overplayed.

“This seems to be overselling on the part of the treasurer,” said Jonathan D. Cohen, a visiting fellow at Harvard University in Cambridge. “It seems she’s using this as an opportunity to push for online lottery sales.”

Cohen, originally from Newton, studies the history of gambling in the United States, and has done extensive research on the Massachusetts State Lottery. He said regulated sports gambling is still too new to draw any definitive conclusions, but he believes sports betting will nonetheless expand gambling rather than take customers away from the state Lottery.

“It might cut into lottery play, but it’s more likely the market will expand rather than cannibalize itself,” he said.

The theory has played out in limited cases in other states where sports gambling is already legal. In Rhode Island, a month after sports betting was legalized, traditional lottery games increased 15.5 percent compared to the same month a year earlier.

“We’re obviously monitoring it all very closely,” said Paul Grimaldi, Rhode Island Department of Revenue spokesman. “We want to see if money is just moving from one pocket to another.”

Whether sports gambling results in more gamblers could ultimately impact local budgets, and where dollars are spent could dictate how much local aid is disbursed. Indeed, roughly $18 of every $100 generated by the state Lottery before commissions is redistributed to the 351 cities and towns. Last year, the amount totaled nearly $1 billion, accounting for about 5 percent of total revenue for municipal budgets, according to Cohen.

Under Baker’s proposal, sports-gambling revenue would likewise be distributed to municipalities. He proposes taxing bets at a rate between 10 percent and 12.5 percent, which would generate an estimated $35 million in revenue during fiscal 2020, according to state estimates.

For Salamone, who’s responsible for ensuring customers are old enough to purchase lottery tickets in his stores, permitting sports betting on phones seems like an easy way for people to break the rules in the future. One solution, he suggested, would be to allow sports betting at lottery terminals in stores, which could help regulate the gambling with an already-established system, and prevent retailers from losing business.

“People have only so much money to spend,” he said.

Eli Sherman is an investigative and in-depth reporter at Wicked Local and GateHouse Media. Email him at esherman@wickedlocal.com, or follow him on Twitter @Eli_Sherman.